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What to know about Akorn Pharma's bankruptcy

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Akorn Pharmaceuticals (Akorn Operating Company LLC) has filed for Chapter 7 bankruptcy, layed off its entire workforce without severance pay, and closed all its U.S. sites, according to a company letter issued by President and CEO Douglas S. Boothe and posted in the Herald & Review on February 22, 2023.

The company listed over $100 million in debt.

Where did this come from?

In 2018, Fresenius Kabi AG, a German drugmaker, backed out of a $4.3 billion buyout of the company (which led to a court battle that ended in the judge siding with Fresenius).

In 2019, Akorn received warning letters from the FDA over violations of current good manufacturing practice (CGMP) regulations and a lack of thorough investigation into various problems with its drug product quality.

In 2020, the company filed for Chapter 11 bankruptcy. It later completed a sale to lenders.

What happened in 2022?

Despite initiating a process to sell the company, Akorn failed to receive an appropriate bid to cover outstanding liabilities—including debt.

In March 2022, seven of its branded ophthalmic products were acquired by Théa Pharma, Inc.

Later in July, the company closed its Somerset, New Jersey, manufacturing plant—laying off 240 employees.

In September, the company agreed to pay $7.9 million to resolve allegations that it had falsely claimed three of its generic drugs were covered by Medicare Part D—a violation of the False Claims Act.

And most recently?

According to Boothe, the company’s owners notified Akorn’s shareholders, creditors, and other interested parties that it would not provide the necessary funding needed to allow the business to continue to run while seeking additional funding options.

How many sites/employees are affected?

The company employed 400 employees at its U.S. locations, which included corporate headquarters in Gurnee, Illinois, as well as manufacturing plants located near Decatur, Illinois; Somerset, New Jersey; and Amityville, New York.

Research and development facilities were based in Vernon Hills, Illinois, and Cranbury, New Jersey.

Now what?

The company is currently under investigation by the Illinois Department of Labor (IDOL) due to not filing a required 60-day notice (when there is over 75 employees) with employees, local and state governments of these mass layoffs or plant closures until February 21, 2023—two days before employees’ terminations were effective.

What could happen?

If IDOL finds violations with Akorn’s handling of U.S. site closures and layoffs, the company is likely to be subject to civil penalties.

The Worker Adjustment and Retraining Notification (WARN) Act under federal and Illinois law outlines these financial penalties along with a potential scenario where employers would have to give back pay and benefits for the period of violation—up to 60 days.